Transocean chairman to retire under pressure

Published 8:10 pm, Monday, May 13, 2013

The shareholders of Transocean, the world's largest offshore driller, will meet Friday in Zug, Switzerland.

The shareholders of Transocean, the world's largest offshore driller, will meet Friday in Zug, Switzerland.

Photo: Fabrice Coffrini / Getty Images

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Carl Icahn has nominated three allies to serve on the board and replace three existing directors.

Carl Icahn has nominated three allies to serve on the board and replace three existing directors.

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In this undated handout photo released by the Joint Terrorism Task Force of Boston, a piece of what the FBI says was a pressure cooker that held one of the bombs that exploded during the Boston Marathon. Law enforcement officials said April 16, that the explosives that killed three people and injured more than 170 during the Boston Marathon on Monday were most likely rudimentary devices made from ordinary kitchen pressure cookers. (Joint Terrorism Task Force of Boston via The New York Times) -- EDITORIAL USE ONLY less

In this undated handout photo released by the Joint Terrorism Task Force of Boston, a piece of what the FBI says was a pressure cooker that held one of the bombs that exploded during the Boston Marathon. Law ... more

Photo: New York Times

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J. Michael Talbert's announcement could be a way to satisfy institutional shareholders.

J. Michael Talbert's announcement could be a way to satisfy institutional shareholders.

Transocean chairman to retire under pressure

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The sudden announcement Monday that Transocean's board chairman plans to retire could be an acknowledgement that billionaire investor Carl Icahn has the votes to get the incumbent ousted at this week's annual meeting.

Or it could be part of a strategy to appease large institutional shareholders who want fresh blood, but might support J. Michael Talbert for another one-year term — knowing he would step down and allow a transition to a successor who sees things the company's way rather than Icahn's.

The key move in the high-stakes chess game comes Friday when Transocean shareholders meet in Zug, Switzerland. Among the items on the agenda: the election of directors and dueling dividend proposals.

“I suspect Mike's announcement in some part reflects a desire to take this issue off the board, if you will,” said Martin B. McNamara, a Transocean director and head of the board's corporate governance committee, in an interview Monday.

“To the extent he has become a bit of a symbol, this will hopefully enable people to focus back on what we think is the most important issue, which is what is the right process for the company going forward,” McNamara added.

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Icahn said in an open letter to shareholders after Talbert's announcement that they shouldn't be fooled.

“After facing strong shareholder dissent, and in what appears to be a last-ditch effort to preserve his re-election, Mike Talbert has promised shareholders that if elected, he will shortly resign,” Icahn said. “We find it to be utterly absurd that a chairman facing the prospect of losing his directorship would be so brazen as to ask shareholders to return him as chairman so that he and the board can then pick his successor.”

Icahn has nominated three allies to serve on the board and replace three existing directors, including Talbert. He also has proposed a $4-a-share special dividend. Transocean is pushing for its entire slate of directors and a $2.24-a-share dividend.

For its part, the Swiss drilling contractor said in a regulatory filing that Talbert's retirement “is not due to any disagreement with the company or its management regarding any matter relating to the company's operations, policies or practices.”

In an accompanying statement, Transocean said that if Talbert, 66, is re-elected for another one-year term, he will retire from the board before the next annual meeting in 2014. McNamara's committee plans to conduct a search process to fill the vacancy.

“With Mr. Icahn, who is a significant shareholder, and all of our shareholders, we welcome their input and suggestions they have,” McNamara said. “That communication I think can occur in a more orderly fashion than a proxy contest. I'm not sure a proxy contest is a good forum for an exchange of ideas.”

But don't expect Icahn's board nominees to be among the people recruited by the board to replace Talbert next year if he is re-elected to the board this week.

Transocean — the world's largest offshore driller, with a significant presence in Houston — has characterized Icahn's nominees as unfamiliar with its operations and overly beholden to Icahn.

“We don't see that they would be contributors to the board,” McNamara said. “Their independence is subject to a greater question than our typical nominee. We have recommended against them. We don't think they compare favorably to the people we nominated or anyone we would be likely to recruit in the coming time.”

Two independent shareholder advocacy groups oppose Icahn's dividend proposal, but they are split over his board picks.

Icahn said Monday that a third group, Swiss proxy advisory firm Ethos Foundation, has recommended institutional investors vote in favor of electing all three Icahn nominees.

Icahn, who disclosed earlier this year that he had acquired a sizable stake in the company and that he would push aggressively for change, has accused the current board of failing to create shareholder value.